Week in review: Press gripes, sequester fights

It’s a little-discussed risk of the automatic budget cuts — and yet another smack to the already battered 2012 tax filing season.

Absent a last-minute deal, the 8.2 percent funding cut facing the cash-strapped IRS would likely translate to fewer tax specialists on hand to help taxpayers with their returns and root out tax fraud — two tasks that watchdog groups say need more, not fewer, hands.

To be sure, the IRS could find other ways to make up the budget cuts, but all indications from senior IRS and Treasury officials are that the agency would be down a significant number of people.

And while the sequester isn’t great for any federal agency, it amounts to particularly bad timing for the IRS. That’s because, depending on union negotiations, furloughs could come just as millions of Americans are trying to pay their income taxes.

“At a minimum, it’s probably going to take longer for people to get through on the phone; it’s going to take longer for refunds to be processed,” said Floyd Williams, a senior tax counsel at Public Strategies Washington.

Williams, who worked for the IRS for nearly two decades and directed the agency’s legislative affairs office for 16 years, says the sequester could also be a boon to those who purposely commit fraud, or accidentally fill out returns incorrectly.

“Anytime there is a drop-off in enforcement, you’re going to see a growth in the so-called tax gap, which is the difference between what the government collects and what is rightfully owed,” he told POLITICO.

Right now, that gap is close to $400 billion.

Of course, this tax season has already been a topsy-turvy one. Last-minute tax tweaks in the fiscal cliff forced the agency to postpone the tax season start date and push back some types of returns, and a court decision in mid-January left tax preparers scratching their heads over return preparation rules.